Customer proximity is the decisive success factor

Digitalization and foreign influences are reshaping the retail landscape
The flow of information and goods between manufacturers, retailers, and consumers continues to evolve. More and more distribution channels are emerging and competing with one another. The internet and digitalization are giving rise to further innovative business models. Foreign markets are putting pressure on Switzerland, affecting both traditional retail and e-commerce. Brand manufacturers want to better bring their brand experiences to end customers and are also taking on traditional retail functions. For all forms of retail, one function is becoming increasingly important: creating access to customers.

A Challenging Situation in Swiss E-Commerce

Even though online retail grew by another 10 percent in 2015, it was a difficult year for some retailers. The growth rates of the survey participants were lower than in previous years. About one-third even saw a decline in sales. One reason for this is fierce competition, particularly from abroad. The market share of foreign e-commerce providers grew by two percentage points in 2015 to a remarkable 20 percent—though there are significant differences between industries. Adjustments to a business model can also initially lead to a decline in revenue. «Profitability and sustainability have become more important,» explains study author Wölfle. «Swiss companies are no longer blindly focusing on growth in e-commerce.»

Cross-channel business concepts remain highly important

Retailers that have the opportunity to do so are driving multichannel strategies forward. The proximity to customers offered by brick-and-mortar locations is also intended to be leveraged as an advantage in the context of e-commerce. More so than in previous years, pure-players are also embracing brick-and-mortar concepts. They want to achieve greater visibility and set up local services such as pickup locations or service points. Not least due to the massive rollout of 290 PickMup pickup stations by the Migros Group, 80 percent of study participants now believe that pickup solutions will become established in the market. Some retailers are beginning to try to expand the limited product ranges in their stores by providing access to online product ranges.

Logistics as a Competitive Advantage

Swiss providers also want to capitalize on their physical proximity to customers in logistics: They can deliver faster than foreign competitors and set up pickup options more easily. Many providers are investing heavily in logistics. Now that delivery times have been shortened, the focus is shifting to giving customers the ability to specify their preferred delivery time and location. The integration of various modular services and partners—such as for assembly, commissioning, and disposal—offers customers personalized options.

A New Boost in Payments

An order placed by a customer ready to make a purchase must not be jeopardized by a barrier during the payment process. This is the most important requirement for payment solutions. Next comes the call for greater simplicity—including on smartphones—and lower fees for providers. While the retail sector has largely clung to its aging solutions, service industries such as public transportation have made great strides. The latter has been extremely successful with mobile ticket sales solutions and automated payment processes: «Buy a ticket with two clicks on your smartphone.».

Amazon as a Catalyst for the Will to Assert Oneself

In many countries, Amazon is the go-to destination for online shopping. Its selection is vast, and its logistics capabilities are spectacular. Switzerland still lacks a comparable counterpart: As B2C marketplaces, ricardo.ch and siroop are, so to speak, in their infancy. siroop—perhaps the most exciting e-commerce project in Switzerland right now—is setting a remarkable pace as a startup. Amazon is feared: What could Swiss providers offer to counter Amazon? A three-quarters majority of the study panel believes that a strong Swiss B2C online marketplace would be good for Switzerland, so as not to simply leave the market to Amazon.

Two Online Retail Giants on the Rise

Digitec Galaxus generated sales of nearly 700 million Swiss francs in 2015 and has been Switzerland’s largest e-commerce provider of consumer goods ever since. In addition to Galaxus, BRACK.CH can also be described as an online department store due to its wide-ranging product selection. Both are believed to be capable of holding their own even in the face of intensified competition from Amazon. However, beyond their own potential, they do not provide Swiss e-commerce with the leverage needed to counter Amazon—after all, they are not online marketplaces.

Brand manufacturers are taking the initiative

Brand manufacturers are seeking a more active role in their relationships with end customers. They have no choice but to do so: Traditional retail is losing ground, and brand fans are demanding direct access. Brand manufacturers want to expand their brand universe beyond traditional distribution channels. Conflicts with retailers are inevitable, but not unavoidable. The division of labor must be reevaluated. However, there is no alternative to accepting the diversity of customer demands and the coexistence of different purchasing channels.

Retail will continue to be needed in the future

Even as brands become more involved in direct-to-consumer sales, retailers will remain an indispensable partner for most of them in the future. Manufacturers need a strong retail sector that draws attention to their products within its customer segment (reach), promotes their products in an appropriate manner (promotion), does not undermine brand policy, and, when necessary, communicates with customers on behalf of the brand and addresses their concerns (service). By far the most important asset a retailer has is its access to consumers. «Almost all products and services are available at multiple locations simultaneously,» says study author Wölfle. «The decisive factor for sales will be who has access to the customers.»

Topics in the 2016 Swiss E-Commerce Report

– An Overview of the Swiss E-Commerce Market in 2016
– Key Areas of Activity in 2016
– Development of online marketplaces and online department stores
– Digitalization and Foreign Markets as Drivers of Structural Change
– Annual Focus: Direct-to-Consumer Sales
– Five-Year Outlook for Swiss E-Commerce Through 2021

The study is available free of charge at:E-commerce-report.ch/orders

Goal

Implemented by: the Institute for Business Informatics at the University of Applied Sciences and Arts Northwestern Switzerland (FHNW) on behalf of Datatrans, Switzerland's leading specialist in online payments.